[Gnso-newgtld-wg] Vickey auctions

Kurt Pritz kurt at kjpritz.com
Thu Jul 9 18:28:53 UTC 2020


Hi Kathy: 

A fine point: I believe a Vickrey auction is one where the parties don’t know the bids of the other parties bit can know their identities. 

Regardless of whether a Vickrey, top-price or ascending bid auction model is selected, my concern has to do with the timing of the sealed bid. I can think of nothing more discouraging to a newcomer, investor and potential contributor to the domain name industry than to say, “Pay the $185,000 application fee and, oh yeah, give us a sealed bid for how many millions you will bid in a sealed auction where the delegation might take place months or years from now.” Pile onto that the uncertainty of how the evaluation process will play out and additional costs that might be added, how many bidders there are, who they are, and the relative value of TLDs at some point in the future when the delegations are made. I don’t know of any other auctions that operate in this manner. In other instances, sealed bids are generally required just before the final award. 

Put another way, requiring the sealed bid at the time of application will greatly discourage new participants — especially smaller ones — from our industry. If we are seeking to encourage competition and choice, then the auction should take place close in time to the delegation — whether the auction is sealed bid - top price, sealed bid - Vickrey, or the clock model applied in the first round. 

A final point if I may, is that there has been a substantial amount of study done on the benefits and drawbacks to Vickrey auctions — and there have been examples of unintended detrimental results. The articles I read indicate that each instance includes a complex set of issues requiring advice of competent economists prior to selection of a Vickrey mechanism. The SubPro group might have had long discussions regarding this but I do not think they have been appropriately deep or informed by economics science. 

I do not have an issue as to whether a Vickrey or other form of auction is selected, but think there should be an appropriate study if we are to deviate from the past. Our high-level policy recommendation might be to select an auction model encouraging "individuals bid truthfully” and alert ICANN to consider Vickrey as an alternative to the current model and the need for study as part of the implementation.

Maybe ICANN could get that study going now so that it could inform the implementation effort. 

Thanks this opportunity to speak up everyone. 

Kurt 



> On Jul 9, 2020, at 10:12 AM, Kathy Kleiman <kathy at kathykleiman.com> wrote:
> 
> Hi Donna,
> Tx for the question. In a true Vickery Auction, the parties don't know who they are bidding against.  Everyone then has the opportunity to bid what they think the TLD is worth to them -- without knowledge of who they are bidding against.  A bidder  can't raise the bid knowing they are bidding against a small party, a single TLD, or a Global South applicant. 
> 
> That means that the bids, overall, are lower. Hopefully, this will allow the occasional small party, single TLD, or Global South applicant may win -- and that's one of the goals we have sent for our program. 
> 
> Again, appreciate your question. 
> Best, Kathy
> 
> 
> ----- Original Message -----
> From:
> "Austin Donna" <Donna.Austin at team.neustar>
> 
> To:
> "Kathy Kleiman" <kathy at kathykleiman.com>, "gnso-newgtld-wg at icann.org" <gnso-newgtld-wg at icannorg>
> Cc:
> 
> Sent:
> Wed, 8 Jul 2020 15:33:49 +0000
> Subject:
> RE: [Gnso-newgtld-wg] Vickey auctions
> 
> 
> Kathy
> 
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> The Vickrey auction model may be inherently expedient, but I’m still not convinced that it is inherently fair particularly among players large and small. I’m interested to understand how you think this is the very best way to ensure that smaller parties can prevail from time to time and that the Global South can obtain a share of new gTLDs.
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> Donna
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> From: Gnso-newgtld-wg [mailto:gnso-newgtld-wg-bounces at icann.org] On Behalf Of Kathy Kleiman
> Sent: Monday, July 06, 2020 7:30 AM
> To: gnso-newgtld-wg at icann.org
> Subject: [Gnso-newgtld-wg] Vickey auctions
> 
> 
> 
> 
>  
> 
> Hi All,
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> 
> 
> For days and months we discussed auctions and ways to improve them. One thing we learned is that Vickrey auctions are inherently fair.  They provide a process that encourages bidders to bid the price that is fair to them -- and set out exactly what they are willing to pay. They avoid collusion and unfair dealing. I thought we had agreed to recommend this method -- a sealed bid at the time of application. 
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> I want to reintroduce some of what we learned about Vickrey Auctions in our long discussions -- and why they are a trusted method of auctions among players large and small and with an array of resources.  I think it is the very best way to ensure that smaller parties can prevail from time to time, and that the Global South can obtain a share of new gTLDs. 
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> Best, Kathy
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> What is a Vickrey Auction?
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> https://corporatefinanceinstitute.com/resources/knowledge/other/vickrey-auction/ <https://urldefense.com/v3/__https:/corporatefinanceinstitute.com/resources/knowledge/other/vickrey-auction/__;!!N14HnBHF!owM79hXrIldCESZnBUdA6FpA7CuFv2fr6Q6QHzhAgMoYrXoCxFqRe6V5LVNMOZQ2c9sc%24>
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> A Vickrey auction is a sealed-bid auction where bidders submit bids without knowing the bids of other people. However, as opposed to other sealed-bid auctions, the price paid is the second-highest bid price and not the winning bid price. The Vickrey auction was named after William Vickrey, a Canadian who won the 1996 Nobel Prize in Economics for his research on asymmetric  information <https://urldefensecom/v3/__https:/corporatefinanceinstitute.com/resources/knowledge/finance/asymmetric-information/__;!!N14HnBHF!owM79hXrIldCESZnBUdA6FpA7CuFv2fr6Q6QHzhAgMoYrXoCxFqRe6V5LVNMOdllQwyz%24> in economics.
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> Understanding a Vickrey Auction
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> In a Vickrey auction, the individual is bidding their true value and are not trying to assess what everyone else is going to bid. Therefore, in a Vickrey auction, the individual is bidding the maximum amount they are willing to pay and are not disadvantaged by it.
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> By utilizing the second-price mechanism <https://urldefense.com/v3/__https:/www.researchgate.net/publication/228296863_How_Good_is_the_Generalized_Second-Price_Mechanism__;!!N14HnBHF!owM79hXrIldCESZnBUdA6FpA7CuFv2fr6Q6QHzhAgMoYrXoCxFqRe6V5LVNMOS7ZLYJt%24> in a Vickrey auction, individuals bid truthfully – individuals are motivated to bid their maximum value because the individual understands that if their bid wins, they will only need to pay the second-highest bid value.
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